Unlevered IRR =IRR(Net Operating Income)
Levered IRR =IRR(Net Operating Income - Interest Pmts - Principal Pmts)
Is this correct to include principal payment deduction in levered IRR calculation?
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Yes - principal payment and sales proceeds are both capital events. Can't think any reason you wouldn't.
This is more simplistic than it looks....
Unlevered IRR is net cash flows without any loans/leverage. So would just be net cash flows with add backs of loan amount + fees at time zero, debt service annually, and loan payback at disposition (and any other loan releated fees/costs).
It's just the same as doing the deal with no loans, and an all cash investment instead.
What redever said is correct
IRR is not just NOI. For the unlev IRR you have to factor in the Purchase at Year 0 and the Exit. For the lev IRR, have to factor in purchase price less debt proceeds. On the exit, net sale proceeds = sale price less principal.
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